Itaú BBA - ARGENTINA – Higher-than-expected inflation in October

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ARGENTINA – Higher-than-expected inflation in October

November 12, 2020

Inflation was markedly above the Bloomberg consensus estimate of 3.1%.

Inflation posted a higher-than-expected increase in October. The CPI rose by 3.8% mom in October, from 2.8% in September. Inflation was markedly above the Bloomberg consensus estimate of 3.1%. Annualized quarterly inflation increased to 44.5% in the quarter ended in October, from 34.2% in 3Q20. The 12-month inflation increased to 37.2%, from 36.6% in September.

Core inflation also increased in October. Core item prices jumped by 3.5% mom (the highest reading in 2020), from an increase of 2.3% in September. The core inflation reading rose to 41.5% (annualized) in the quarter ended in October, from 36.3% in 3Q20. Food prices rose by 4.8%. Prices for seasonal products (which also include seasonal apparel) increased by 9.6% mom in October and 128.8% annualized in the quarter ended in October. Prices for regulated items (mostly frozen) rose by 1.5% mom and 19.1% annualized in the quarter ended in October, following a third consecutive adjustment of fuel prices. 

In all, inflation continued to accelerate, despite frozen utility tariffs and controls on exchange rate purchases and on some consumer prices, reflecting the expansion of the monetary base and, possibly, the spike in the parallel exchange rate. 

The central bank has responded by raising interest rates further. The one-day repo rate and the 30-day Leliq rate were set at 32% and 38%, respectively (from 31% and 36% previously). The regulated rate paid on depositors was adjusted up to 34% for the Badlar (from 32%) and 37% for other deposits (from 34%).  We forecast 37% inflation for 2020 and 50% for 2021 as the government advances its adjustment of public tariffs and the lifting of caps on prices for some consumer items.



Juan Carlos Barboza
Diego Ciongo



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